THE era of the 99p music download is under threat after George Osborne
launched a £300m tax raid on technology giants such as Apple and Amazon.

The chancellor is closing a loophole that allowed internet companies to avoid
paying British VAT on sales of digital goods, such as music, electronic
books and smartphone games.

The move marks a step-up in the international drive to reap more cash from
foreign tech companies, which save billions of pounds a year across Europe
by exploiting gaps in the tax system.

Apple and Amazon sell virtual goods through offices in Luxembourg, with VAT
levied at the duchy’s rock-bottom 3% rate. Under the new rules, which come
into force in January, downloads to British consumers will taxed by HM
Revenue & Customs at the standard 20% rate. Sales of digital newspaper
subscriptions will also be subject to 20% sales tax.